How Banks Learned To Stop Worrying And Love Startup Rivals

Banks are hearting startups these days.

Confident enough to throw a few crumbs.

Once upon a time, titans of industry and pillars of Wall Street like the great James Dimon would gaze upon the gnats nipping at their ankles and—if they paid them any heed at all—would crush them, steal their business and go on their way. Brought low by hubris and the contemptible likes of Ben Bernanke and Tim Geithner, however, the giants of finance are somewhat more reticent about certain things likely to make their balance sheets shine bright red in the eyes of the regulatory set. Like, say, small-business loans which, while often fetchingly profitable, are too capital-intensive, to use the parlance of our times. And so, rather than destroying would-be competitors, the oligarchs are going into business with them. Except for Brian Moynihan, who has a reputation to uphold.

J.P. Morgan Chase & Co. recently decided to tap On Deck Capital Inc. to create an online small-business loan for its customers. The move is the clearest sign yet that large banks are choosing the path of embracing up-and-coming lenders rather than facing off against them….

“Every major bank is working on this,” said John Barlow, president of Barlow Research. “This is really just the beginning of a re-engineering of the entire small-business lending process.”

But not every bank will end up enlisting outside help. For instance, Bank of America Corp. has no plans to partner with online or alternative lenders in part because of potential dings to its reputation, Chief Executive Brian Moynihan has told analysts.

Big Banks Start to Embrace Startups [WSJ]